TALLAHASSEE - Jan. 19, 2007 - Lawmakers had promised quick and significant relief to the property insurance crisis, and while proposals in the state Capitol would lighten ratepayers' burdens, it will likely take months to realize the benefits.
When they do come, Floridians could see their overall homeowners' rates trimmed by 13 percent to 26 percent under bills heading toward final negotiations in the ongoing special legislative session. Between the state bureaucracy and insurers' renewal cycles, results will lag behind the activity in Tallahassee.
Late Thursday, the Office of Insurance Regulation provided key data lawmakers had anticipated as they convene today to reconcile separate House and Senate bills. Both bills offer new state-backed coverage of insurers' risks in the event of a catastrophic hurricane. Insurers would not have to purchase expensive reinsurance as such a backstop and would, by law, have to pass savings on to consumers.
According to the new OIR data, the House reinsurance plan would reduce the windstorm-only portion of homeowners' policies by 26 percent on average. The Senate plan would reduce windstorm-only insurance rates by nearly 53 percent on average. Since the windstorm portion normally accounts for half or more of overall homeowners' premiums, total premium savings from the House plan would probably be at least 13 percent, and 26 percent from the Senate plan, according to OIR.
Proposals to have different effects
Those figures exclude the state-backed Citizens Property Insurance Corp., because it does not buy reinsurance, and State Farm's Florida subsidiary, which is submitting its own figures and probably would not purchase reinsurance from the state because it can get it cheaper through its parent company, OIR spokesman Bob Lotane said.
OIR's analysis does not delve into geographic, age or other differences between homes in different parts of the state, which are factors in premiums. The legislative proposals are expected to affect small, medium and large insurers differently, with larger insurers likely to expect the greatest rollbacks.
For a $200,000 home that originally had a $1,000 insurance premium double to $2,000, a 25 percent rollback would make the next premium $1,500.
A pair of huge increases in Citizens Property Insurance Corp. rates would be killed immediately under both plans. But customers with private policies were cautioned to be patient as the legislation plays out in the coming months.
"I've been very clear that with the exception of Citizens, all of the rate reductions probably cannot take effect until July 1," said Steven Geller, D-Hallandale Beach, architect of the Senate plan.
That's because it would take 60 days for insurers to resubmit rate filings; state regulators would have to analyze the filings; and many insurers already have private reinsurance contracts in place that would be supplanted by the expansion of the state catastrophe fund, meaning those customers might have to wait until their next renewal period to feel the benefit.
"It'll be rolling rate reductions," said Geller.
Meanwhile, the legislation doesn't undo assessments on all homeowner policies for earlier shortfalls in Citizens funds, the catastrophe fund and the state guaranty association. Another 6 percent assessment comes due this summer.
Figures tempered on rollbacks
The single most important outcome of the special session - the bottom line for homeowners' insurance customers - has been the subject of confusion and frustration as lawmakers rolled up their sleeves on a House-Senate compromise.
On Wednesday, House members were touting rollbacks as high as 65 percent for their plan. That figure was later tempered to 33 percent to 38 percent. State senators were expecting 33 percent to 40 percent savings on their plan.
The OIR analysis released Thursday is considered much more reliable than the cursory estimates provided to lawmakers on the spot as they drafted legislation. For example, Lotane said the House discount was overly optimistic at 33 percent to 38 percent because analysts had estimated that insurers spend more of their premium dollars on reinsurance than they actually do.
The office also will be charged with pricing the final compromise package expected to be ready Monday.
Lawmakers remain optimistic
Given the variations in estimates this week, will such estimates be reliable?
"I expect them to be," said Bill Posey, R-Rockledge, chairman of the Senate Banking and Insurance Committee. "Absolutely, 100 percent? Will I jump out the window if they're not correct? No. Will I be disappointed and maybe irritated? Yes. You just have to wait and see."
The final savings figure will be important, as lawmakers will be able to wave it before increasingly irate constituents. For the third straight day, busloads of demonstrators - this time from Brevard County - made a trek to the Capitol to protest high rates.
Lawmakers remain optimistic a compromise this weekend will provide significant relief.
"Eventually we will have a market that is stable enough where rates start coming down," said Senate President Ken Pruitt, R-Port St. Lucie. "Immediately, they are going to come down, long-term they are going to come down, and then private insurers will want to be in Florida in a big way."
Gov. Charlie Crist, meanwhile, said he had "one play I'm calling, and I'm calling it over and over and over again: Reduce rates, reduce rates, reduce rates."
Copyright © 2007 Tampa Tribune, Fla., Jerome R. Stockfisch and Catherine Dolinski. Distributed by McClatchy-Tribune Business News.